China’s Closing Coal Mines Too Slow to Meet Capacity-Cut Targets

China urged state-owned coal producers to accelerate mine closures in order to meet year-end targets as part of President Xi Jinping’s drive to curb industrial overcapacity.

The country’s cuts are behind schedule, with about 95 million metric tons of capacity reduced by the end of July, or 38 percent of the annual target of 250 million tons, the National Development and Reform Commission, the country’s economic planner, said in a statement on its website on Thursday.

Coal companies in major coal-producing provinces including Shanxi and Inner Mongolia have no plans to execute their coal-capacity reduction work until the last quarter, which could put the annual reduction target at risk, NDRC said.

Coal companies should now “report their progress in coal capacity production on a monthly basis, and should strive to finish their assigned reduction quota in the early part of November,” NDRC said. The companies were earlier required to meet their targets by the end of December.

Besides tackling pollution, the Chinese government says it wants to eliminate unprofitable companies in industries such as coal and steel that are struggling with a glut of capacity. The country plans to eliminate as much as 500 million tons of coal production capacity, and consolidate a further 500 million tons by 2020.

Strong Signal

“This sends a strong signal that China’s determination in cutting coal overcapacity remains unchanged,” Deng Shun, an analyst with ICIS China, a commodity researcher, said by phone. “The major coal producing regions planning to cut capacity the most in the fourth quarter means that supplies will be tight this winter and prices will increase.”

Authorities last month threatened to punish regional governments for failing to close unneeded coal mines as only 29 percent of the coal capacity reduction target was met in the first half of the year.

Shenhua Group Corp., the country’s biggest coal producer, has met all of its annual capacity reduction target, while Shaanxi Coal and Chemical Industry Group Co. has met 86 percent of its annual target, according to the NDRC statement posted on Thursday.